GILTS: Early Bid Fades, Futures Hover Above Initial Support

Gilts have faded from opening highs, taking cues from core global FI markets thus far.

• The bullish reaction to Fed balance sheet discussions revealed in the January meeting minutes (released last night) has been tempered by spill over from EGB weakness linked to set up for auctions and continued worry surrounding increased supply to facilitate European defence spending.
• Futures hover above initial support at yesterday’s low (91.91), which protects more meaningful support at the Jan 24 low (91.52).
• Yields flat on the day across the curve.
• We wrote a brief update on gilt swap spreads, which continue to show elevated issuance/fiscal risk premium when compared to pre-Budget levels.
• BoE pricing is little changed on the day, showing ~50bp of cuts through the remainder of ’25.
• Only lower tier data evident on the UK calendar today, so focus is likely to remain on wider macro and cross-market cues.
• However, the UK release schedule picks up again on Friday, with flash PMIs, retail sales and public borrowing data all due.